Registered Retirement Savings Plans and
Registered Retirement Income Funds (RRSPs/RRIFs)

Frequently asked questions - Archive

The following publications are archived and kept for historical purposes. Caution should be used when referring to these documents, as they may not reflect the law or policy currently in force. If you have any interpretative questions about the current law or policy, contact the Registered Plans Directorate by phone at (613) 954-0419. Also, see our list of current FAQs.

1. Spousal or common-law partner designation [former Question #1 from FAQs]
2. Withholding tax on payments from a registered retirement income fund (RRIF) [former Question #17 from 2003 RRSP/RRIF Consultation Session, Appendix B]

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1. [Former Question #1 from FAQs] Can information about the spouse or common-law partner be removed from an RRSP or RRIF if the contributor and annuitant's marriage or common-law partnership breaks down?

Yes. The annuitant can ask the issuer or carrier to remove the information about the contributor from a spousal or common-law partner RRSP or RRIF when there is a breakdown of the marriage or common-law partnership. However, the following conditions must be met:

• The issuer or carrier must be satisfied with the proof that the marriage or common-law partnership has broken down (e.g., a separation agreement, court order, decree, etc.); and
• There were no spousal contributions in the tax year that the annuitant made the request, nor in the two tax years immediately preceding the request. This includes any funds transferred from another spousal or common-law partner RRSP or RRIF if contributions were made to that plan or fund during the three years just mentioned.

When these two conditions are met, the issuer or carrier can transfer the funds from the spousal or common-law partner plan or fund to a new or existing individual RRSP or RRIF in the annuitant's name. The issuer or carrier that receives the funds is not required to include any information about the spouse or common-law partner who contributed to the original plan or fund. In other words, the contributor information cannot just be deleted from the existing spousal or common-law partner RRSP or RRIF; the issuer or carrier must transfer the funds to a new or existing individual plan or fund.

The information about the spouse or common-law partner who contributed to the plan or fund can also be removed if this person dies. In all other cases, this information cannot be removed from an RRSP or RRIF.

2. [Former Question #17 from 2003 RRSP/RRIF Consultation Session, Appendix B] We have recently been advised that CRA has changed its position on how we are to charge withholding tax on systematic withdrawals from a RIF/LIF/LRIF. The industry standard is to charge withholding tax based on the gross amount of each individual systematic withdrawal. Can you please advise if this is correct?

CRA has taken the position that, if each withdrawal is the result of a separate request made by the annuitant, the applicable rate of withholding is based on the individual payment requests. However, if applicable withdrawals are in the nature of instalments made in fulfillment of a single request by the annuitant, it is the CRA's position that the rate of withholding will be based on the total sum requested and not on each individual instalment.

Does this mean that the withholding tax rate charged to each individual systematic instalment should be based on the total amount requested for the year (excluding lump sum requests)? For example: instalment payments of $1,500 per month for an annual amount of $18,000 currently would be charged a withholding tax rate of 10 % per instalment based on the amount of $1,500. Under the new rules, the payments would be charged a rate of 30 % per instalment based on an annual amount of $18,000.

The withholding rates for lump-sum payments are:

• 10 % if payment is not more than $5,000;
• 20 % if the payment is more than $5,000 but not more than $15,000; and
• 30 % if the payment is more than $15,000.

It is CRA's longstanding position that, when qualifying lump-sum payments are split into multiple payments (installments), and that each payment is made in fulfillment of a single compensation that is known in advance, the withholding rate applicable to the total payment is used. If each payment is a separate payment, the lower rate of withholding applies to each.

In the example provided, if the annual amount of $18,000 was known in advance and arrangements were made to pay this in instalments (i.e. monthly, quarterly, semi-annually, etc...) the withholding tax rate of 30 % would apply to each instalment payment. Conversely, if an individual requests $1,500 in January and the payer is not aware of any future requests at the time of payment, the withholding tax rate would be based on the individual payment (of 10 % in this example).

It should be noted that the payee may exercise his or her discretion and request that the payer increase the withholding tax rate in order to reduce or eliminate a future income tax liability.